RIGA - The government has officially asked for money from the International Monetary Fund to provide assistance to Latvia's ailing economy. The IMF has responded positively and is ready to help.
"Against the background of the global financial crisis, Latvia is experiencing a sharp downturn in output growth and external funding pressures. Accordingly, the Latvian authorities have asked IMF, together with the European Union, to provide technical and financial support," said IMF Managing Director Dominique Strauss-Kahn in a press release.
The government also gave Finance Minister Atis Slakteris the green light to ask for funds from the European Commission. The government will know in approximately four weeks how much money the institutions will be able to provide.
Though Bank of Latvia President Ilmars Rimsevics did not give any hints as to the amount of money requested or expected, he did say that representatives of the two institutions would assess and evaluate Latvia's situation before naming any sort of sum required to stabilize the economy.
"It could be called a kind of a plan of macroeconomic stabilization measures, and this plan will comprise a number of measures that so far might not be considered or weighed, and the concrete sums will be adjusted to these plans," Rimsevics said on public radio.
LOOKING TO THE FUTURE
The central bank head did note that Latvia is not in fact facing any extreme crisis, but that they are simply trying to secure funds should they be necessary in the future.
"Latvia is not a small, isolated islet in the global financial ocean, and the developments of the past months have shown that financial liquidity has run dry in the whole world, namely, there is less and less money available for economic development. Swedish banks that have lent a lot of money to the Latvian economy are also gradually closing their money pipelines," he said.
Rimsevics also said that the government of Latvia had invested a great deal of money in bailing out and supporting Parex Bank, making 2009 a hard year for everyone economically.
"This has been a farsighted step aimed at ensuring a small financial reserve in case there is even less money," Rimsevics said.
Following in the footsteps of Iceland and recently Hungary, Rimsevics explained that the decision to ask for money was made both by the Bank of Latvia and the government after looking at local and global economic trends.
After a meeting with IMF representatives in the U.S., Rimsevics said that the nations that had received assistance from the IMF and EC in the past had stabilized their economic situation. The goal of Latvia's IMF request is to secure funds for the upcoming year.
Rimsevics was also critical in his views on the lack of a balanced budget in Latvia, saying that had there been more thought put into it, there would have been a reserve for this very situation and there would be no need to ask for additional funds.
"Estonians have such a reserve," Rimsevics said.
To dispel critics of the plan who have said that this is just another way to boost an already inflated budget, Rimsevics said, "if somebody thinks that this is going to be just an additional injection to fill the budget deficit, then it is a naive talk, as conditions, of course, will not be easy."
Finance Minister Slakteris went on to paint a bleak image of the economic future, but noted that various organizations are ready to help.
"The picture ahead of us does not look bright. The EC has expressed readiness, and their people have already gotten involved. So we wish luck to everybody involved, because nothing has happened yet. We are just preparing for any case."
